U.S. prepared to authorize Chevron to boost Venezuela’s oil output

Chevron Corp (NYSE: CVX ) could soon win U.S. approval to expand operations in Venezuela and resume oil trading as the Venezuelan government and opposition resume political talks, four people familiar with the matter said Wednesday.

The US authorization for Chevron to help rebuild the country’s oil production was one of the biggest plums to hold talks between the Venezuelan government and its opposition.

U.S. officials this year sought to facilitate a return to talks between socialist President Nicolas Maduro and the country’s opposition by offering some easing of sanctions and the release of some Venezuelans in U.S. prisons.

Both Venezuelan and US officials are pushing to hold talks in Mexico City this weekend, people say, the first since October 2021. Maduro has gained influence this year with newly elected leftist leaders in Brazil and Colombia and weak opposition support.

Chevron declined to comment on the pending approval or terms. The no. 2 US oil companies still comply with the existing license limits, said a spokesperson. A license allows maintenance operations to expire on December 1.

LICENSE REQUIREMENTS

A condition prepared for approval would prevent Venezuelan oil firm PDVSA from receiving proceeds from Chevron’s oil sales. And they will cut “the use of corrupt shadow firms that control the flow of Venezuelan oil to countries like China,” said a person familiar with the matter in Washington.

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White House officials aim to “move oil sales from illicit and non-transparent channels to transparent, legal channels,” the person said. The United States could revoke the permit if Maduro’s government fails to negotiate in good faith or uphold its commitments, the person said.

“We have long made clear our willingness to provide targeted relief based on concrete steps that reduce the suffering of the Venezuelan people and bring them closer to the restoration of democracy,” said a US State Department spokesperson.

US President Joe Biden’s administration has reason to grant Chevron a bigger operating license with US shale production growth slowing, Russian oil exports shrinking under sanctions and Saudi Arabia hinting at possible OPEC output cuts.

The United States this year kept oil prices from rising by releasing more than 200 million barrels of the nation’s emergency oil reserves. But that release will end soon.

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OUTPUT PRE-SANCTIONS

The Biden administration has suggested easing Venezuela’s sanctions, including giving Chevron a broad license to revive oil output and regain trade privileges in Venezuela, will come only if the two sides make progress in political talks.

The US Treasury could issue new licenses on Monday or Tuesday. The extended term will not be a response to the energy price problem, but reflects a desire “to support the restoration of democracy in Venezuela,” one of the people said.

Chevron is a partner with PDVSA in several oil joint ventures that pump and process crude oil for export. Combined, the businesses had been producing about 200,000 barrels per day (bpd) before US sanctions and a lack of financing cut output.

PDVSA did not respond to requests for comment on the deliberations.

Following the oil sanctions on Venezuela in 2019, Chevron got an exemption to trade Venezuelan crude to pay off billions of dollars in outstanding debt. Those privileges were suspended by President Donald Trump a year later as part of his “maximum pressure” strategy to oust Maduro, whose re-election in 2018 is not recognized by the West.

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The United States this year began to consider Chevron’s request to expand operations with more urgency as Washington seeks oil to replace the supply hit by sanctions to Russia as well as OPEC’s decision to cut output.

PRESSURE MOUNTING

In recent weeks, representatives of Maduro and the opposition held discussions in Paris under the auspices of the presidents of France, Colombia and Argentina to break the political deadlock.

In Washington, Republicans and some of Biden’s fellow Democrats have been skeptical Maduro is ready to negotiate in good faith and opposed relaxing sanctions unless he reciprocates.

A large number of oil firms abandoned joint ventures with PDVSA to pay debts and freeze operations. The reduced position of Chevron as the only strong partner left that can revive the output, set to fall this year about 650,000 bpd, below the official target of 2 million bpd.

Venezuela holds about 300 billion barrels of oil reserves, the largest in the world, but has been unable to reach its production targets due to lack of investment, poor maintenance, lack of supply and US sanctions.
Source: Reuters



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